Launched on 30 July 2015, Ethereum is a decentralised exchange protocol that allows users to set up smart contracts. These are pre-established contracts or applications that self-execute to ensure authenticity without the intervention of a third party. For example, Ethereum lets users establish a future contract to purchase an asset only when certain conditions are met. The Ethereum protocol allows for the verification as well as the enforcement of a mutual contract between parties on the blockchain. This protocol allows developers to create applications, store records and transfer funds according to past instructions.
Since 2017, thousands of companies have developed their own ‘smart contracts’ and often use the Ethereum protocol as well as Ether tokens (ETH) as a means of settlement.
One reason for Ethereum's growing success is its position as the blockchain of choice for many products and services that use DeFi - or decentralised finance - applications.
These new applications aim to replace traditional financial products - such as loans, savings, or derivatives - with the use of a decentralised technology, rather than relying on a company or a bank. Another favourable development for the Ethereum protocol is the exponential growth of NFTs (Non-Fungible Tokens). Many NFT projects such as CryptoPunks or Decentraland have their ‘smart contracts’ on the Ethereum blockchain. And as more users flock to interact with these applications, they need ETH to perform their transactions.
Ethereum's blockchain incorporates several principles introduced by Bitcoin, including ‘mining.’ Ethereum's growing success with the public has attracted an increasing number of new miners. The result is that mining is becoming increasingly difficult, which may eventually discourage independent miners for whom Ether will no longer be a profitable cryptocurrency. To avoid a surge in the difficulty of mining, updates were planned.
This was the case in 2018 with a new version named Serenity.